Blockchain-based innovations are radically transforming the energy and utility industry

Publish date:

February 7, 2018

With its decentralized Distributed Ledger Technology (DLT) Blockchain is set to convert the industry...

In recent years, the energy and utility industry has been transforming itself completely. This transformation has encompassed everything from core business models to the experiences offered to customers. It can partially be attributed to changing business trends, but the decentralized approach proposed by blockchain technology has been the real driver here. The fundamental disruption blockchain is creating is even more relevant within the energy and utility domain, as brokers and middlemen play major roles in the industry.

With its decentralized distributed ledger technology (DLT), blockchain is set to convert the industry into a peer-to-peer network model where transactions happen in real time. These transactions are bundled into blocks after the appropriate encryptions are applied and are made available to all stakeholders. This allows for transaction reconciliation and tracking invoices and payments to happen with absolutely no disputes and without middlemen or regulators. Cryptographic consensus algorithms keep the transactions safe with appropriate timestamps, which cannot be changed once logged.

Due to increased awareness in the production and usage of renewable energy, many energy consumers have become energy producers as well. These consumers have been dubbed prosumers. Prosumers are growing in numbers throughout the entire utility sector. They don’t want to be restricted by their suppliers, which act as middlemen in selling them energy and utility services. For example, Vector, a New Zealand-based company works with Power Ledger, an Australian start-up, to provide a blockchain-based energy exchange facility. Here, prosumers simply trade electricity with one another and receive payment in real time from an automated and trusted reconciliation and settlement system. Another example is Vattenfall, a Dutch energy company, which has developed a P2P energy exchange based on blockchain for their residential prosumers with their subsidiary Powerpeers. Additionally, in the US, LO3 Energy has also started a similar pilot in many of their regions. Bouygues is experimenting this concept in the city of Lyon.

Energy Data Exchange Platforms

With the focus on reducing global warming, reliable sets of data on energy creation from various sources and usage patterns are gaining importance all over the globe. Artificial Intelligence and machine learning platforms can effectively leverage this data in predicting usage patterns, and map this to producers in real time. These datasets will help us improve our lives and how we consume energy –more specifically in the areas of energy data benchmarking, smart-grid management, green certifications, and energy investment decisions.

For example, an Austrian company, Grid Singularity has been working on a Blockchain-based platform for energy data exchange. It is expected that similar blockchain-based platforms for other utility domains will also be evolving soon.

Smart Contracts and Billing

Traditionally, contract, billing and invoice management have been central activities under the direct responsibility of the service provider. This centralized nature is one of the key reasons for customer disputes, and can even damage customer satisfaction, which in turns leads to churn.

Blockchain enables smart contracts and billing to be decentralized as a part of the distributed ledger. This means that contract and billing transactions occur as transactions and are grouped, time-stamped and bundled as immutable records in the form of blocks. Every block contains the appropriate links and a copy of each block is available to all the nodes in the network.

This makes any customer run the consensus algorithm to know a single fact and hence no dispute and no customer churn due to a billing dispute. German Electric company RWE works with Slock.it and launched an autonomous electric charging station for electric vehicles, which integrates a smart contract that uses blockchain technology. In their next phase, they plan to use a public blockchain for fraud-proof accounting. Innology, a German company has introduced an eWallet based on DLT to their customers to charge up their electric vehicles.

Distributed Devices and Appliances Control

Energy and utilities companies are also working on managing micro-demand responses at the device level using blockchain-based ecosystems. Based on the decentralized P2P networks, this is optimizing usage as well as power consumption. A Finnish clean energy company, Fortum is working in this area as per Gartner report.

More companies are working on blockchain and bitcoin-based payment systems. Some companies such as Solar Change are reportedly working on implementing Artificial-Intelligence and machine-learning based technologies for smart predictions within blockchain-based systems and cryptocurrencies. Wien Energie works with a Canadian startup BTL Group to introduce the blockchain based services.

Blockchain technology is relatively new and people in the industry are in the process of understanding its applications. Also, there is still fear among the early users due to lack of poor or no regulatory support, lack of trust in the technology, and lack of ledger interoperability among several other reasons. Despite the fear, I am sure we shall overcome the fear with proven structure and credible success stories and so I believe that this technology will fundamentally change the way we exchange values and conduct business. HfS Research, in their webinar dated 18 Jan 2018 report that the enterprise blockchain services market is expected to double in 2018 and reach $ 1billion.

The resulting disruption will threaten the existence of several organizations as we move towards a P2P-technology-based model where there are no middlemen, no commissions, no mediation, and no central databases. This technology is set to reign supreme and play a key role in our exciting journey, working to redesign human life.